WORLD TRADE  
ORGANIZATION  WT/COMTD/AFT/W/20 
12 May 2010  
 (10-2713) 
Committee on Trade and Development 
Aid for Trade  
 
 
 
MAINSTREAMING AID FOR TRADE AT A THEMATIC LEVEL  
 
WORKSHOP ON AID FOR TRADE AND DEVELOPMENT FINANCE 
 
Background Note by the Secretariat  
  
 A workshop on Aid for Trade and Development Finance will be held at the WTO Secretariat on Thursday, 27 May 2010.    I. OBJECTIVE 
1. The workshop has three objectives.  It is an opportunity for Members to: 
• understand how Aid for Trade interacts with other development finance instruments, 
particularly other trade-related lending;  
• learn how Aid for Trade relates to a growth ar ea in development finance, Islamic finance;  
and  
 
• survey Aid-for-Trade flows in 2008 and the ou tlook for development finance more generally. 
 2. The workshop is organized in two sessions.  Th e first session will situate Aid for Trade within 
multilateral development finance frameworks, and ex amine its interaction with other development 
finance instruments, in particular Islamic Finan ce.  The second session will examine Aid for Trade in 
2008 and the outlook for development finance more broadly.  
3. This background note is not intended as a comprehensive analysis of the topic of Aid for 
Trade and Development Finance.  It is intended as a reference to assist Members and Observers to 
prepare their participation in the workshop on 27 May 2010.  The note contains many references to 
sources Members may wish to consult to deepen thei r analysis of the overview given in this note. 
II. AID FOR TRADE AND DEVELOPMENT FINANCE 
4. In 1999, the United Nations (UN) General As sembly adopted a Resolution on "High-level 
International Intergovernmental Consider ation of Financing for Development".
1  This Resolution led 
to consultations, in particular with the World Ba nk, the International Monetary Fund (IMF) and the 
World Trade Organization and the organization of  the International Conference on Financing for 
Development in Monterrey, Mexico on 18-22 March 2002.  The event culminated in the adoption of 
the Monterrey Consensus on Financing for Development.   
                                                      
1 Resolution A/RES/54/196.  See:  http://www.un.org/esa/ffd/overview/chronology.htm  WT/COMTD/AFT/W/20 
Page 2  
 
  5. In the Monterrey Consensus, heads of State and Government examined the challenges of 
financing for development and the interaction betw een different forms of finance.  The leaders 
committed themselves to actions under the following six headings:
2 
• mobilizing domestic resources, (for example by  developing the domestic financial sector 
through the orderly development of capital markets and sound banking systems);   
• attracting international flows (for example by pr omoting a transparent, stable and predictable 
investment climate and encouraging internati onal financial institutions to increase their 
support for private foreign investment); 
• promoting international trade as an engine fo r development (for example by placing the needs 
and interests of developing countries at the heart of the WTO's work programme, through expanded efforts to address supply-side constr aints, trade infrastructure and support for 
trade-related training);
3 
• increasing international financial and techni cal cooperation for development (for example 
through a substantial increase in Official Deve lopment Assistance (ODA) to help developing 
countries achieve development goals (Millennium  Development Goals (MDGs) and work to 
make ODA more effective);4 
• sustainable debt financing and external debt relief (for example through the extension of debt 
relief measures and better management  of external liabilities);  and  
• enhancing the coherence and cons istency of the international m onetary, financial and trading 
systems." 
6. The Monterrey Consensus clearly identifies trade as  an engine for development.  This role of 
trade was subsequently reconfirmed at the D oha International Conference on Financing for 
Development which took place in Doha, Qatar on 29 November-2 December 2008.5  The Doha 
Declaration specifically recognizes Aid for Trade as an "important component of the measures that 
will assist developing countries in taking advantage of the opportunities offered by the international 
trading system, the outcome of the Doha Round and regional trade agreements."   
7. The Doha Declaration underlines that ODA can play a catalytic role in mobilizing private 
flows.  It also encouraged multilateral and regiona l development banks to facilitate additional private 
flows and recognized the multilateral developmen t banks, including the World Bank, regional and 
sub-regional development banks, as an importa nt source of financing for development. 
8. The Doha International Conference noted progress in a number of areas of financing for 
development:  increased mobilization of domestic resources, rises in private international capital 
flows to developing countries, progress in in ternational ODA commitments and improvements on 
                                                      
2 See:  http://www.un.org/esa/ffd/monterrey/MonterreyConsensus.pdf  
3 In paragraph 27 of the Consensus it is also stated that:  "To benefit fully from trade, which in many 
cases is the single most important external source of de velopment financing, the establishment or enhancement 
of appropriate institutions and policies in developing co untries, as well as in countries with economies in 
transition, is needed.  Meaningful trade liberalization is an important element in the sustainable development 
strategy of a country.  Increased trade and foreign direct investment could boost economic growth and could be a significant source of employment. 
4 Under this heading, the Consensus also urged "... developed countries that have not done so to make 
concrete efforts towards the target of 0.7 per cent of gross national product (GNP) as ODA to developing countries and 0.15 to 0.20 per cent of GNP of developed countries to least developed countries ...". 
5 See: http://www.un.org/esa/ffd/doha/documents/Doha_Declaration_FFD.pdf   WT/COMTD/AFT/W/20 
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  external debt.  It recognized the efforts made to meet the commitments offered at the Group of Eight 
(G8) meeting in Gleneagles, Scotland.6  Commitments offered by G8 countries and other donors were 
estimated to increase ODA by around US$50 billion by  2010, as compared to 2004.  The Gleneagles 
commitments for Africa were calculated to lead to an increase of approximately US$25 billion a year by 2010, representing more than a doubling of ai d to the continent as compared to 2004.  
III. AID FOR TRADE - INTERACTIONS WITH OTHER FINANCING FOR 
DEVELOPMENT 
9. The Aid-for-Trade Task Force recommendations of 2006 state that "the scope of Aid for 
Trade should be defined in a way that is both broad enough to reflect the diverse trade needs 
identified by countries, and clear enough to establish a border between Aid for Trade and other 
development assistance of which it is a part".
7  The Task Force established agreed benchmarks for the 
reliable global monitoring of Aid-for-Trade efforts, benchmarks which situated Aid for Trade as part 
of financial and technical coope ration for development i.e. ODA.8   
10. Aid for Trade is a key instrument which supports trade's role as an engi ne for development.  
In aiding trade's role in development, Aid for Trade complements other forms of development finance 
which support trade, notably private interna tional flows, domestic resources and lending by 
multilateral development banks.  For example, Aid for Trade can operate in conjunction with other 
financing instruments, for example through public-p rivate partnerships, or help to provide the 
necessary conditions for other financing to be mob ilized e.g., by assisting reforms to improve the 
business environment.    
11. The interaction of Aid for Trade with other form s of development finance is borne out in the 
reporting by multilateral development banks on thei r trade-related activities.  In 2008, total 
trade-related commitments offered by the World Bank Group reached US$20.8 billion.  The largest 
item in this total was US$14 billion in non-concessi onal financing for trade-related activities in 
middle-income countries, provided by the Intern ational Bank for Reconstruction and Development 
(IBRD).9  IBRD lending goes to both the public and pr ivate sectors.  The World Bank also provides 
concessional funding for 79 low-income countries th rough the International Development Association 
(IDA).  IDA trade-related financing totalled US$6.8 billion in 2008 – and went to both the public and 
private sector.10  Some "blend countries" are eligib le for both IBRD and IDA operations. 
12. World Bank trade-related activities classed as Aid for Trade are virtually all financed through 
IDA.  In 2008, the Bank provided US$3.5 billion in  Aid-for-Trade-related support to the public sector 
from IDA resources.  From a broader developm ent finance perspective, the World Bank's 
Aid-for-Trade operations represented approximately 17 per cent by value of its total trade-related 
activities.  The US$3.5 billion in Aid-for-Trade financing provided by the Bank was complemented by a larger pool of financing of some US $17.3 billion in other concessional and non-concessional 
                                                     
 
6 For more information on the Gleneagles commitments, see: 
http://www.g7.utoronto.ca/summit/2005gleneagles/communique.pdf  
7 See:  http://docsonline.wto.org/DDFDocuments/t/WT/AFT/1.doc  
8 The OECD defines ODA as: "grants or loans to countries and territories on Part I of the DAC List of 
Aid Recipients (developing countries) which are:  (a) undertaken by the official sector; (b) with promotion of 
economic development and welfare as th e main objective;  and (c) at conc essional financial terms [if a loan, 
having a Grant Element (q.v.) of at least 25 per cent]. In addition to financial flows, Technical Co-operation (q.v.) is included in aid. Gran ts, Loans and credits for military  purposes are excluded." See: 
http://www.oecd.org/glossary/0,3414,en_2649_33721_1965693_1_1_1_1,00.html#1965586
 
9 Concessional lending falls within the definition of ODA.  Non-concessional lending refers to official 
bilateral transactions with a grant element of less than 25 per cent.  
10  For more information about IBRD and IDA see the World Bank website, www.worldbank.org  WT/COMTD/AFT/W/20 
Page 4  
 
  trade-related lending. 
11   The regional development banks also provide trade-related support which is 
not classed as Aid for Trade.  
13. Non-concessional financing for trade has grown significantly.  The Organization of Economic 
Cooperation and Developmen t (OECD) tracks non-concessional financing for trade which falls within 
the definition of other official flows (OOF).12  OECD data show that trade-related OOF more than 
doubled in value from US$11.4 billion in  2002 to US$25.7 billion in 2008.  
14. Support to the banking and financial services' sectors in developing countries is an area of 
assistance categorized as Aid for Trade.  In 2008, assi stance in this sector accounted for 9 per cent of 
total Aid for Trade.  Furthermore, it is an area in which Aid-for-Trade support has grown significantly:  from an average of US$ 1.46 billion between 2002-2005 to US$3.79 billion in 2008. 
15. The global financial crisis underscored the need , as recognized by the Monterrey Consensus, 
for well-functioning banking systems which channel savings and foster productive investments.  One 
aspect of the crisis which was followed closely by  the WTO was disruption to the markets for trade 
finance.
13  These difficulties were directly addressed  by the London Summit of the G20 in April 2009 
where leaders agreed a package to  inject additional liquidity and provide public guarantees in support 
of US$250 billion of trade transactions  in 2009 and 2010.  Actions take n by the international financial 
institutions (IFIs) included initiatives such as the Global Trade Liquidity Programme.14   
16. The preceding analysis has highlighted how Aid for Trade can work in conjunction w ith other 
development finance instruments in support of trade's role as an engine for development.  It is clear 
that Aid for Trade can play a catalytic role in helping establish the conditions for finance to be 
mobilized in support of trade-related activities e.g ., domestic savings through the banking sector or 
through foreign direct investment.   
IV. ISLAMIC FINANCE:  A GROWING MARKET FOR DEVELOPMENT FINANCE 
17. Islamic finance markets have grown at nearly 10  per cent per annum in the last decade.  The 
global potential of the Islamic banking market is  "conservatively" estimated at US$4 trillion, 
according to Moody's Investor Service.  A repor t by International Finance Services London (IFSL) 
estimates that the global market for Islamic fi nancial services, as measured by Sharia-compliant 
assets, rose by 25 per cent to US$751 billion at the end of 2008.15  Growth slowed in 2009, due to the 
financial crisis, although the Islamic finance i ndustry has weathered the slowdown.  The IFSL 
estimates that Islamic commercial banks accounted for 74 per cent of asset s, investment banks 
10 per cent, Sukuk (Islamic bond) issues also at 10 pe r cent, funds 5 per cent and takaful (insurance) 
1 per cent.   
                                                      
11  For more information, see:  "Unlocking Global Opportunities: The Aid for Trade Program of the 
World Bank Group" for further information: 
http://siteresources.worldbank.org/INTPR EMNET/Resources/UnlockingGlobalOpp.pdf  
12  Other official flows are defined by the OECD as official sector transactions which do not meet the 
ODA criteria, e.g.: (i) grants to developing countries fo r representational or essentially commercial purposes; 
(ii) official bilateral transactions intended to promote development but having a grant element of less than 
25 per cent;  (iii) official bilateral transactions , whatever their grant element, that are primarily 
export-facilitating in purpose;  (iv) the net acquisition by governments and central monetary institutions of 
securities issued by multilateral development banks at market terms;  (v) subsidies (grants) to the private sector 
to soften its credits to developing;  and (vi) funds in support of private investment. 
13 For more information on WTO's wo rk on trade finance issues see: 
http://www.wto.org/english/thew to_e/coher_e/tr_finance_e.htm  
14 For more information on the GTLP, see: 
http://www.ifc.org/ifcext/about.n sf/Content/FinancialCrisis_GTLP  
15 See: http://islamic-finance-resources.blogspot.com/ 2010/02/ifsl-report-islamic-finance-2010.html   WT/COMTD/AFT/W/20 
 Page 5 
 
 
  18. Leading countries for Sharia-compliant  banking assets and services include Iran, 
Saudi Arabia, Malaysia, United Arab Emirates, Ku wait, Bahrain and Qatar.   G r o w t h  i n  I s l a m i c  
banking services in these countries has been strong.  For example, Malaysia's Islamic banking assets 
reached US$72.5 billion in 2008.  Malaysia's Isla mic Finance market has grown 20 per cent annually 
since the Malaysia International Islamic Financia l Centre (MIFC) initiative was launched in 2006 to 
promote Malaysia as a major hub for international Islamic finance.   
19. Islamic finance is moving beyond its historic cen tres and expanding to other countries in the 
Middle East and North Africa, Asia, Africa, Europe and North America.  The Islamic Development Bank Group (IsDB) is helping promote this expa nsion.  The IsDB Group pioneered Shariah 
compatible methods of raising funds by issuing tradable asset-based instruments (Sukuk).  The first 
issuance of international Sukuk by IsDB took place in 2003.   
20. The IsDB Group provides various forms of assistance to its 56 members to establish Islamic 
banking and finance services.  For example, the Is lamic Research and Training Institute acts as a hub 
for research activities.
16  The IDB Group is also exploring nich e areas such as Is lamic microfinance.17  
Launched in 2007 with an initial capital of US$3 bil lion, the International Islamic Trade Finance 
Corporation (ITFC) is an autonomous entity of the Is DB which aims to advance trade between Islamic 
countries and the rest of the world by providing Sharia-compliant trade credit and finance.  ITFC's aim is to ease the flow of trad e by ensuring that exporters get trade credit and in so-doing expand 
intra-Organisation of Islamic Conference count ries trade volumes from 15 per cent in 2005 to 
20 per cent by 2015.  Individual Bank members also provide assistance on a bilateral basis.
18 
21. An informal note by the Chairperson to th e Committee on Trade in Financial Services 
(Job(09)/7) gives an overview of the trade -related aspects of Islamic banking.   
V. AID FOR TRADE IN 2008  
22. Preliminary analysis shows that Aid for Trade grew 37 per cent in real terms between 2007 
and 2008.  Total Aid for Trade reached US$41.7 bi llion in 2008, an increase of 62 per cent from the 
2002-2005 baseline.  Aid for Trade accounted for 37 per cent of sector allocable ODA in 2008 – an 
increase from 32 per cent in 2007.19  Bilateral and multilateral donors scaled up their Aid-for-Trade 
support by 54 per cent and 12 per cent, respectivel y.  Japan was the largest donor (US$8.7 billion), 
followed by the United States (US$6.4 billion), the European Union (US$5.9 billion), the World Bank 
International Development Association (IDA) (US $5.2 billion), and Germany (US$2.9 billion).   
23. With respect to regional distribution, Asia and A frica continued to be the top two recipients of 
Aid for Trade in 2008.  Asia received US$18. 5 billion, accounting for 44 per cent of total 
Aid-for-Trade flows (a 40 per cent increase on 2007 figures) and Africa received US$14.5 billion, 
accounting for 35 per cent of total Aid-for-Trade flows (a 23 per cent increase on 2007 figures).  Aid for Trade to Europe amounted to US$3.9 billion, accounting for 10 per cent of total Aid-for-Trade 
flows.  The Americas received US$10 billion (5 pe r cent of total Aid-for-Trade flows), and Oceania 
US$0.38 billion (1 per cent of total Aid-for-Trade flows). 
24. All sectoral areas of Aid-for-Trade interventi ons received increased support in 2008.  The 
transport and storage sector showed the largest increase, receiving a total of US$14.6 billion (an 
                                                     
 
16 For more information about IRTI see: 
http://www.irti.org/ir j/portal/anonymous?NavigationTarget= navurl://316c6304c3d8a2da9a9312fac871e337  
17  For more information, see:  http://www.cgap.org/p/site /c/template.rc/1.9.5029/  
18  For example, Malaysia offers assistance to other developing countries on a South-South basis.  See: 
http://mtcp.kln.gov.my/cooptype_short01.htm  
19 Sector allocable ODA is aid that is spent on speci fic economic or social sectors as opposed to aid 
allocated to debt relief, emergency ai d, administrative costs and refugees. WT/COMTD/AFT/W/20 
Page 6  
 
  increase of 75 per cent).  This sector now accounts for 35 per cent of total Aid for Trade.  Trade 
policy and regulation received US$1.3 billion (a n increase of 37 per cent);  and economic 
infrastructure received US$23 billion (an increase of 43 per cent).  Support to the energy and banking 
and finance sectors also increased (both received an additional US$1 billion), and an increase of 
24 per cent was seen in building productive capacity, which received US$17 billion.   
VI. GLOBAL OUTLOOK FOR DEVELOPMENT FINANCE 
25. The impact of the crisis on development finan ce is reflected in various reports.   UNCTAD's 
Global Investment Trends Monitor in January 2010  reported that global foreign direct investment 
(FDI) flows fell by close to 40 per cent in 2009, to US$1.0 trillion, from US$1.7 trillion in 2008.  
Flows to developing and transition economies declin ed to US$475 billion - a drop of 39 per cent in 
2009. 
20 The fall in investment came after a surge in investments to developing and transition 
economies in 2008.  In Africa, inflows rose to a reco rd level, with the fastest increase in West Africa 
(a 63 per cent rise over 2007); inflows to South, East and South-East Asia witnessed a 17 per cent 
expansion to hit a new high; FDI to West Asia continued to rise for the sixth consecutive year; 
inflows to Latin America and the Caribbean rose by 13 per cent; and the expansion of FDI inflows to 
South-East Europe and the Commonwealth of Independent States rose for the eighth year running.  
UNCTAD's latest Global Investment Trends M onitor published in April 2010 notes that global 
investment flows have now stabilized and prospect s seem to be improving.  However, overall flows 
remain well below the highs of 2007 and 2008. 
26. The World Bank and the IMF publish annually the Global Monitoring Report series.  The 
report examines progress in implementing the polic ies and actions for achieving the MDGs and 
related development outcomes, with a focus on fi nancing for development.  The Global Monitoring 
Report for 2010 examines the MDGs after the Crisis.  It concludes that as a result of the crisis, 
53 million more people will remain in extreme povert y by 2015 than otherwise would have been the 
case.  Even so, the report projects that the number of extreme poor could total around 920 million five years from now, marking a significant decline from the 1.8 billion people living in extreme poverty in 
1990.   
27. The Global Monitoring Report for 2010 includ es a chapter on "The International Community 
and Development: Trade, Aid, and the Interna tional Financial Institutions" which includes a 
sub-section on "Expanding aid for trade."
21  The chapter notes that the IFIs boosted lending and 
adopted innovative programmes to confront the global crisis and the s ubsequent development 
emergency.  It states that, in response to the crisis, total commitments (including concessional and 
non-concessional loans plus grants) by the IMF and the multilateral development banks rose from 
US$68 billion in 2007 to US$234 b illion in 2009.  The goals of this assistance were to stabilize 
markets and avert the collapse of the banking and private sectors in developing countries, to limit the slide in economic growth and support the poor, an d to minimize any interruption in development 
progress.
 
VII. GROUP OF 20 AND STRENGTHENING THE CAPITAL BASE OF 
MULTILATERAL FINANCIAL INSTITUTIONS 
28. The World Bank's Global Monitoring Report mak es clear that changes will be needed to 
ensure greater cooperation and effectiveness on the part of the IFIs.  A process of reform was 
launched by leaders of the Group of 20 (G20) at the Pittsburgh Summit on 24-25 September 2009.  At 
                                                      
20 For more information, see:  http:/www.unctad.org/Templates/Page.asp?intItemID=1465&lang=1  
21 For more information and the full text of the report, see: 
http://web.worldbank.org/WBSITE/EXTERNAL/E XTDEC/EXTGLOBALMONIT OR/EXTGLOMONREP201
0/0,,contentMDK:22519784~pagePK:64168427~piPK:64168435~theSitePK:6911226,00.html   WT/COMTD/AFT/W/20 
 Page 7 
 
 
  the Summit, it was agreed to "ensure that the World Bank and the regional development banks have 
sufficient resources to fulfil these four challenges and their development ma ndate, including through a 
review of their general capital increase that n eeds to be completed by the first half of 2010."22  This 
process is advancing as the World Bank and regiona l development banks hold their annual meetings 
in 2010.  Thus far, the followi ng decisions have been reached: 
• On 30 April 2009, the Asian Development Bank's (ADB) Board of Governors agreed to a 
general capital increase which tripled th e ADB's capital base from US$55 billion to 
US$165 billion.23   
• On 25 April 2010, a general capital increase of  US$86.2 billion was agreed for the World 
Bank Group at the meeting of Development Committee of the Board of Governors.24  
• At the Annual General Meeting of the Inter-A merican Development Bank in Cancún, Mexico 
from 19-23 March 2010, agreement was reached on a US$70 billion recapitalization of the IaDB.   
• The European Bank for Reconstruction and Development will hold its Annual General 
Meeting in Zagreb, Croatia on 14-15 May 2010 to  consider a request to provide additional 
capital to maintain business volumes at US$8-9 billion per annum.
25 
• The 2010 Annual Meetings of the Boards of G overnors of the African Development Bank and 
the African Development Fund will be held in Abidjan, Côte d’Ivoire, from 27-28 May 2010 
and consider a proposal to triple the Bank' s capital resources to nearly US$100 billion.26   
29. To help low-income countries weather the global financial crisis, the IMF has also revamped 
its concessional lending facilities to make them  more flexible and meet increasing demand for 
financial assistance from countries in need.  These cha nges became effective in  January 2010.  Once 
additional loan and subsidy resources are mob ilized, these changes will boost available resources 
through the new Poverty Reduction and Growth Trust for low-income countries to US$17 billion 
through 2014.27 
30. The World Bank Monitoring Report notes that managing the availability and allocation of 
concessional resources will remain a major challenge as the recovery proceeds.  It notes that aid from 
countries in the OECD's Development Assistance Co mmittee (DAC) rose by 0.7 per cent in real terms 
in 2009 to US$119.6 billion, but that it falls short of earlier commitments, especially for Sub-Saharan 
Africa.  It argues that to keep alive the hope of halving poverty by 2015, aid has to expand to meet 
previous commitments.   
31. This background note has sought to position Aid for Trade in the broader context of 
development finance.  It has described how Aid for Trade can interact with other development finance 
                                                      
22 The four challenges referred to were food security, human development and security;  support for 
private-sector led growth and infrastructure;  and fina ncing the transition to a green economy.  See The Leaders 
Statement: The Pittsburgh Summit: http://www.pittsburghsummit. gov/mediacenter/129639.htm   
23 For more information, see:  http://www.adb.org/annualmeeting/2009/  
24 For the full text of the Development Committee Communiqué, see: 
http://siteresources.worldbank.org /DEVCOMMINT/New sAndEvents/22556084/FinalCommunique(E)042510.p
df 
25  Further information on the EBRD is available at: http://www.ebrd.com/ 
26 Further information can be found on the African Development Bank website at 
http://www.afdb.org/en/  
27 For more information on IMF assistance to low income countries, see: 
http://www.imf.org/external/np/exr/facts/concesslending.htm  WT/COMTD/AFT/W/20 
Page 8  
 
  instruments, including for example by providing assi stance to establish Islamic finance systems.  The 
note has examined the outlook for Aid for Trade and development finance more generally.  In so 
doing, it has underlined how Aid for Trade can support th e role of international trade as an engine for 
development as recognized by the Monterrey Consensus.  
 
__________